Chinese and Americans Make Up Over Half of All HNWIs

Having a close cultural and business affinity with at least one of the world’s two largest economies is a clear imperative if you want to be a wealth manager of any significance. 

In recent years, much of the discussion in private banking and wealth management has focused on the strategic importance of having ultra-high-net-worth individuals as clients.

The rare species with more than $30 million is commonly seen as the salve soothing any private banker or wealth management team’s annual targets into reality in one fell swoop - even though you can easily shoehorn the world’s entire population of UHNWIs into a medium-sized football stadium, as finews.asia has previously indicated.

Short End of the Stick

That makes banking one about as likely as winning the lottery unless you have the connections to make it happen.

High net worth individuals, or those with over $10 million, have been getting the short end of the stick in all this, even though they should be the segment many banks focus on more intensely.

Robust Business

Having larger numbers of clients with similar levels of wealth would also build a more robust, reliable business and at least partly inhibit the possibility of social media-triggered bank runs such as we saw with Credit Suisse a couple of years back. 

Although there are far more of them to go around, there are not many, as the total population of 2.3 million HNWIs would still leave a medium-sized Asian city like Hong Kong feeling rather deserted. 

Tough Call

But there is a catch. As a business, you must be completely comfortable, culturally or business-wise, with the US or China. The two geopolitical adversaries together make up 60 percent (marginally rounded up) of all HNWIs out there, as a Visual Capitalist chart released Thursday shows. 

The US has 905,000 HWNIs, followed by China with 472,000. Adding 10th placed Hong Kong’s 43,000 HNWIs only sharpens the picture. Those numbers also highlight what a tough call it is, as clients from each country are at the opposite ends of every pole you can think of, from language and culture to business, economy, and government.

Similar Disparity

We are not even talking about currency regimes, financial sector licenses, and regulation here, as it is an entirely different chapter with very similar, gaping disparities.

In the Trump 2.0 era, how can one even bank the two populations with a legacy mindset of cookie-cutter Starbucks-McDonald's-Microsoft business models underpinned by free markets?

Neutrality 2.0

Those days look like they are gone, and the short of it is you can’t. Indeed, it might just be the most prudent to go back to the older way in the wealth management industry and just be neutral, even-handed, and non-committal. 

But that approach may not prove as beneficial as it was in the decades after World War II, when the industry came of age, and there were clear, measurable differences between sovereign systems, with the constant threat of nuclear war affixing the world into entrenched, and almost calcified, stability. In today’s world, who can reliably say which side anyone is on?

Choice of Risks

The question here is whether picking sides, or not, is a larger risk than the reputational one of being known for banking clients from specific countries or regions. 

That is what makes it such a hard call to make, albeit a vitally important one for both the medium- and long-term future of the industry.